I'm seeing a couple of articles about an initial determination by the ITC against Barnes & Noble on its patent misuse defense, and there's quite a lot of spin on the ball, thanks to the usual suspects. They are reading a lot into a title of a sealed document. I see many misstatements.

So I'll explain a little about the process, so you can understand it. For one thing, the title of the sealed ITC initial determination is called an *initial* determination for a reason. It means it isn't final. The final one comes later. Initial determinations can be reviewed by the full ITC if the defendant petitions for review and even one Commissioner says yes.

Litigation isn't like football. It is rarely suddenly over.

Most importantly, the materials and depositions Barnes & Noble is seeking in discovery from Nokia and MOSAID have not yet arrived, although the ITC did
grant Barnes & Noble's motion to ask Finland and Canada to provide them, and that's still ongoing, so there is likely more to go, even at the ITC. So with those materials not yet in hand, Microsoft's statement today that this means the defense is meritless is... well... to put it kindly premature. I mean, if a determination is made without the complete record being available, what does it mean?

Barnes & Noble had just requested [PDF] that matters be stayed until it receives those materials in discovery, with Microsoft opposing:

Barnes & Noble’s proposed reply, which is attached, addresses several new issues raised by Complainant Microsoft Corporation (“Microsoft”) in its opposition. First, Microsoft claims that Barnes & Noble has not complied with Ground Rule 3.5, but that rule does not apply here. Second, Microsoft claims that Barnes & Noble should wait to move for the relief requested if and when it obtains the evidence, but Barnes & Noble might not be able to obtain that evidence without first obtaining a ruling on the Motion to hold the record open. Third, Microsoft argues that it will be “significantly prejudiced” if evidence is admitted after the hearing, but Microsoft’s concerns are unwarranted conjecture.

Then from the reply attached, Barnes & Noble elaborates:

Microsoft argues that Barnes & Noble should wait until it obtains evidence from Nokia, MOSAID, or their affiliates, before requesting relief under Commission Rule 210.42(g) because moving now is “both premature and improper”. Rule 210.42(g) provides that “[a]t any time prior to the filing of the initial determination, the administrative law judge may reopen the proceedings for the reception of additional evidence”. 19 C.F.R. § 210.42. Nothing in the rule prohibits the Court from ruling on Barnes & Noble’s Motion now. Further, Barnes & Noble’s request also relies on Ground Rule 2, under which modifications of the procedural schedule may be made upon a showing of good cause.

Moreover, this Motion is not “premature”. In fact, one issue in the foreign proceedings is whether the Letters of Request and Rogatory should be enforced without some degree of assurance that the record in this Investigation will be open to receive any evidence obtained. For that reason, a ruling on the present Motion will clarify the issues under consideration abroad and will move those proceedings forward....

Microsoft also speculates that holding the record open until after the hearing could affect the target date in this Investigation, set for August 27, 2012. However, all parties to the Canadian and Finnish proceedings are moving forward on an expedited basis subject to Your Honor’s decisions on Nokia’s “motion to quash” the Letter of Request (Motion Dkt. 769-060) and MOSAID Corp. Ltd.’s motion to quash and/or limit Barnes & Noble’s third-party subpoenas duces tecum and ad testificandum (Motion Dkt. 769-027), and the relevant evidence will likely be in Barnes & Noble’s possession before the end of the hearing on the merits, or soon thereafter.

A footnote lets us know a bit more about what is going on in Canada regarding MOSAID:

3 On January 25, 2012, the Ontario Superior Court of Justice heard argument on Barnes & Noble’s application for enforcement of the Letter of Request to obtain evidence from MOSAID. The Canadian court adjourned the matter until Your Honor rules on MOSAID Corp. Ltd.’s pending motion to quash the U.S. subpoenas. Nevertheless, the Canadian court recognized the urgency of the matter and determined that the parties may return before the court on three-days notice.

I haven't seen a ruling on this motion to hold the record open yet. It was filed on January 27. The hearing is, I believe, still scheduled for February 6. The initial determination may relate to all that, but we can't read it, so this is only a guess, as is everything else you are reading about this so far. Guessing or spinning.

The thing is, the ITC can go forward without a full record. But what would it mean if it does? I don't see how it can mean the end of the story. Microsoft's patent infringement claims have to be addressed at some point, of course, and the ITC is going forward with that for sure, as to whether Barnes & Noble infringes or doesn't, but if Barnes & Noble has a valid patent misuse defense, it might wipe the table clean even if it were found to 'infringe'. Barnes & Noble's position is that the patents are
trivial, invalid, or not infringed, and even if the ITC didn't agree in the end, that doesn't bind the courts elsewhere.

We've seen Nokia in particular try to avoid discovery, threatening to appeal if necessary, so there will be delays, and that was the issue the ITC was dealing with. What can the ITC do? Microsoft was arguing that they should go forward and let Barnes & Noble move for relief after it gets everything, if it has materials to use. Maybe the initial determination relates to that. But my point is, the record is not yet complete. So no determination on the full *merits* has yet happened. It can't. All it can possibly be is a ruling on what is already known, which is not much, since the defense depends on evidence which is in the works but not yet available to the ITC.

The ITC rules are such that things move fast usually, but there is also litigation in US federal district court between the parties, stayed pending the ITC investigation. There Barnes & Noble is accusing Microsoft of using patents to destroy Android. To remind you, a snip from Barnes & Noble's Answer to Microsoft's initial complaint:

...Microsoft has asserted patents that extend only to arbitrary, outmoded, or non-essential design features, but uses these patents to demand that every manufacturer of an Android-based mobile device take a license from Microsoft and pay exorbitant licensing fees or face protracted and expensive patent infringement litigation. The asserted patents do not have a lawful scope sufficient to control the AndroidTM Operating System as Microsoft is attempting to do, and Microsoft’s misuse of these patents directly harms both competition for and consumers of all eReaders, smartphones, tablet computers and other mobile electronic devices....

3. Microsoft did not invent, research, develop, or make available to the public mobile devices employing the AndroidTM Operating System and other open source operating systems, but nevertheless seeks to dominate something it did not invent. On information and belief, Microsoft intends to take and has taken definite steps towards making competing operating systems such as the AndroidTM Operating System unusable and unattractive to both consumers and device manufacturers through exorbitant license fees and absurd licensing restrictions that bear no relation to the scope and subject matter of its own patents....

9. On information and belief, as part of Microsoft’s recently announced agreement with Nokia to replace Nokia’s Symbian operating system with Microsoft’s own mobile device operating system, Microsoft and Nokia discussed and apparently agreed upon a strategy for coordinated offensive use of their patents. Indeed, in videotaped remarks made two days after the Microsoft-Nokia agreement was announced, Nokia’s CEO Stephen Elop confirmed that Microsoft and Nokia had discussed how their combined intellectual property portfolio is “remarkably strong” and that Microsoft and Nokia intended to use this combined portfolio both defensively and offensively. This type of horizontal agreement between holders of significant patent portfolios is per se illegal under the antitrust laws, threatens competition for mobile device operating systems and is further evidence of Microsoft’s efforts to dominate and control Android and other open source operating systems.

This litigation will at some point go forward, no matter what. There is also a complaint sent to the US Department of Justice Antitrust Division by Barnes & Noble. I doubt that in either venue the Nokia and MOSAID materials would be considered irrelevant. Nor would a district court reach a determination without a full record.

So, keep in mind that while folks with agendas may be afoot trying to spin this a bit more than is justified to favor Microsoft, this is not the end of the line necessarily, even if the ITC has decided to rule in Microsoft's favor initially without waiting for the discovery to be complete. I mean, seriously, if all the evidence isn't in and so hasn't been considered, what can any initial determination mean?

There are many unknowns since the document is sealed. But
here's a snip [PDF] from the ITC manual on rules for this type of situation generally:

§ 210.18 Summary determinations.
(a) Motions for summary determinations. Any party may move with any necessary supporting affidavits for a summary determination in its favor upon all or any part of the issues to be determined in the investigation. ...

(f) Order of summary determination. An order of summary determination shall constitute an initial determination of the administrative law judge....

§ 210.43 Petitions for review of initial determinations on matters other than temporary relief.

(a) Filing of the petition. (1) Except as provided in paragraph (a)(2) of this section, any party to an investigation may request Commission review of an initial determination issued under §210.42(a)(1) or (c), §210.50(d)(3) or §210.70(c) by filing a petition with the Secretary. ...

(3) The Commission shall grant a petition for review and order review of an initial determination or certain issues therein when at least one of the participating Commissioners votes for ordering review.

01/27/2012 - 470235
- Respondents Barnes & Noble, Inc.'s and barnesandnoble.com LLC's Motion
for Leave to File Reply in Support of Motion to Hold the Record Open to
Receive Evidence Obtained from Nokia Corp. (or Its Affiliates) and
MOSAID Technologies Inc. (or Its Affiliates)

Certainly patent law always favors the plaintiff, which is Microsoft in this scenario. And we knew that this was an uphill fight for Barnes & Noble anyway, given the tilt against what you and I would consider fairness in both patent and antitrust law. Patent misuse defenses are hard to win. But I seriously doubt this is the end of the story. Barnes & Noble has some of the finest law firms defending it, and law firms of that calibre don't just lay down and die when there is an adverse ruling.

Update: Barnes & Noble has indeed filed a petition for review. And we now have the initial ruling [PDF], called the
Initial Determination Granting Microsoft's Motion for Summary
Determination of Respondents' First Affirmative Defense of Patent Misuse.